TORONTO — A spike in food prices has widened the price divide between Canada’s grocery stores and their discount divisions — a factor that could play out in Loblaw Cos.’ favour.

“Looking at identical items, the discount channel does not appear to have increased shelf prices to any significant degree, while the conventional channel has significantly increased shelf prices,” analyst Keith Howlett of Dejardins Securities wrote in an industry report Monday after an assessment of grocery price fluctuations between retail channels. “We also note a greater diversity of pricing on identical items between competitors in the same channel within the same trading area.”

Howlett anticipates the pricing gap between discount and conventional channels will move toward equilibrium in the next four to six weeks.

But among public grocers, “this period of pricing confusion favours industry leader Loblaw,” given its scale relative to other players and its large network of discount stores, No Frills.

“We would expect customer traffic to shift temporarily toward the discount and club channels until required price increases are implemented across all channels in the coming weeks,” the analyst said. Howlett rates Loblaw as a buy with a target price of $76. He also has a buy on Metro Inc., operator of the discount chain Food Basics, with a price target of $44.

Grocery price inflation, which climbed 4.1 per cent nationally on the fourth quarter according to Canada’s Consumer Price Index, has been aggravated by a weak Canadian dollar. Food prices have become a hot button topic among consumers in recent months, with a Canadian price peak for cauliflower in January drawing international attention.

On a conference call with analysts last week to discuss fourth-quarter results, Loblaw president Galen Weston said the retailer was experiencing “disproportionate momentum” in the discount side of its business.

“The most illustrative example of that is in Alberta, and the good news for us in that province is that we’re really well-positioned in terms of discount, and so I don’t want to say that’s entirely helpful, but certainly I think we’re more insulated from the impact than others,” Weston said.